MACROECONOMIC THEORY AND ANALYSIS
Second Midterm Exam, April 4th, 2007
You have 75 minutes for this exam. Electronic calculators are allowed, but neither
books nor class-notes are permitted. Please, read through the whole exam before starting.
Note that q

MACROECONOMIC THEORY AND ANALYSIS
Second Midterm, April 14 2014
You have 75 minutes for this exam. Neither books, nor class notes, nor calculators are
permitted. Please, read through the whole exam before starting. Note that questions are not
equally weig

1
The Solow Growth Model
The Solow growth model is constructed around 3 building blocks:
1. The aggregate production function:
Y (t) = AF (K (t) ; N (t) ;
which it is assumed to satisfy a series of technical conditions:
(a) It is increasing in both argume

1
Four facts on the U.S. historical growth experience, aka the Kaldor facts
In 1958 Nicholas Kaldor listed 4 key facts on the long-run growth experience of the US
economy in the past century, which have revealed to be still true today and true, to a
large

1
Real Business Cycles
1.1
Motivation
Our empirical analysis of the U.S. time series has shown that there are movements in all
the aggregate variables of interest (output, consumption, investments, etc.) around the
trend. These fluctuations in economic ac

1
Optimal Taxation of Labor Income
Until now, we have assumed that government policy is exogenously given, so the government had a very passive role. Its only concern was balancing the intertemporal
budget. In this section, we let the government be more p

1
Equilibrium Unemployment
The idea of modelling labor markets as frictional markets (i.e., markets which do
not clear) is due to Diamond, Mortensen and Pissarides. For this idea, they won
the Nobel Prize in Economics in 2011. The specic version of the mo

1
Unemployment: Facts and Models
1.1
Facts
Denote the population of working age 16-65 at time as This segment of the population can be divided into 3 groups. First, the group of all the individuals who hold a
job at time , called employment, denoted by Se

1
Social Security
In the U.S. economy, and in the majority of developed countries, there is a Pay-As-YouGo (PAYG) social security system in place: all young workers alive in a given period pay
into a general fund administered by the Government (Trust Fund

MACROECONOMIC THEORY AND ANALYSIS
Second Midterm, April 15, 2015
You have 75 minutes for this exam. Neither books, nor class notes, nor calculators are
permitted. Please, read through the whole exam before starting. Note that questions are not
equally wei

1
Ricardian Neutrality of Fiscal Policy
We start our analysis of scal policy by stating a neutrality result for scal policy
which is due to David Ricardo (1817), and whose formal illustration is due to Robert
Barro (1974). The Ricardian proposition can be

Homework 3 (Answers), Macroeconomic Theory
and Analysis, NYU, Spring 2015
February 22, 2015
1
Habits in Consumption
(a)
Note that utility is separable but utility derived from consumption in period
i
h 2 depends on the level of consumption at time 1. In p

Homework 2 (Answers), Macroeconomic Theory
and Analysis, NYU, Spring 2015
February 12, 2015
1
Pareto Optimality and Competitive Equilibrium with
Taxes
In this static economy the household chooses how much to work and how much to
consume subject to the fol

1
Intertemporal Choices
We now extend our framework to incorporate intertemporal decisions i.e. decisions
,
that involve a trade-o between the present and the future. The vast majority of
important economic decisions are of this type:
the consumption deci

1
1.1
A Dynamic Production Economy
Description of the economy
Time. The economy lasts for two periods t = 1; 2 and is populated by households,
rms and by the government.
Demographics and preferences. Households live for two periods, and have
preferences
U

1
Competitive Equilibrium
Each household and each rm in the economy act independently from each other,
seeking their own interest, and taking as given the fact that other agents will also seek
their best. In the previous section we have described the beha

1
1.1
Unemployment: Facts and Models
Facts
Denote the population of working age 16-65 at time t as Pt : This segment of the population can be divided into 3 groups. First, the group of all the individuals who hold a
job at time t , called employment, deno